and if it's unsustainable, that means we got to change it. this despite the fact that c.b.o. is projecting revenues to be well above the average of the last 40 years. revenue will be up, according to c.b.o.'s numbers. . total debt over g.d.p. it is at 103%. our job-crushing debt not only threatens to collapse the economy through a financial crisis, but it already is destroying jobs and growth today. we are not receiving the growth today we should have as a result of the drag of this debt.

c.b.o. projects that we are entering a future in which our debt is so great that our fastest growing item in the budget will be interest payments. according to c.b.o. annual interest costs will total $5.4 trillion. by 2020, seven years from now, interest costs are expected to exceed the cost of national defense. and i just left the defense committee hearing talking about the sequester and how damaging that will be to the defense department, because half of the cuts follow 1/6 of the budget and that is the defense department and that is too severe and they need to be spread out across the entire spending of issues. interest payments which help no

one build nothing will crowd on the rest of the budget and it will damage our economy in the meantime right now. while we talk of cuts, total spending spending on the 10 largest welfare programs, means tested and poverty programs will increase even more, 76% over 10 years, that welfare programs that overall comprise the single largest item in the federal budget, larger than medicare social security and defense. improving these things would do a lot more than just saving money. like 1996 that helped put us on a path to a balanced budget, smart welfare reform will help

americans rise out of poverty. that's what i want to see. i want to see more people out of poverty and strengthen families, charity and community. we must talking honestly and compassion about these issues. i would like to take a moment to address some comments, senator murray, that you made recently, that republicans are committed to, quote, protecting the rich above all else. and are only interested in starving programs, i'm quoting, that help middle-class families and the most vulnerable americans. that hurts my feelings. that's not what i believe in. i believe we have to have an economy that's growing, creating prosperity and need to help poor people get jobs and move forward in their lives, not dependent, ever dependent on more and more government checks, handouts and programs. that would be the way to save this country, in my opinion.

that's the way to help poor people and i resent the fact that those of us who have a different view of how to help poor people somehow don't care about them. compassion and help for the poor and struggling amounts to more than just borrowing money and sending out more money in the form of checks. my goal is to help working americans from the social and economic harm that is caused by policies i think of this president and the senate majority. these programs have not worked in places like baltimore. one in three residents in baltimore are living in poverty. there are solutions to these problems and we can do better,

we have to do better, we cannot continue on this course. so compassion demands change. our goal must be to help more americans find gainful employment and let them support themselves, their family and to prosper. before closing my remarks, i would like to address a serious challenge we will be facing. we have to consider the immigration questions, and studies show the $2.5 trillion to a national debt or more and we have to watch carefully that program. i look forward to addressing those issues. we have to protect the financial security of the republic.

and with regard to our president's posture and state of the economy, the last big challenge i think maybe our nation faced was when volcker and reagan dealt with this continually growing inflation rate. we are on a dangerous path of debt. it threatens our future. we are going to have to confront that with the same clarity and courage they did at that time. and i came in 16 years ago and i remember that bush did spend more money than he should and i was a critic of that, but i have to say, hardly a bill that came

up that president bush maybe proposed more spending than our democratic colleagues didn't complain because he didn't spend enough and i had to cast vote after vote after vote to try to contain the growth of spending and it was every single democratic colleague was willing to spend more. and it was every single democratic colleague was willing to spend more. we do some other things in a responsible, effective way, we can put this nation on a sound course. we can remove the debt cloud, the drag that this debt has over

us and put us on the path of prosperity and we have to do that and have no choice. i thank you. >> thanks very much. i turn it over to dr. elmendorf. and we are going to have a series of votes called. we'll work our way through five minutes each and hope people can come back and forth from votes so people who have questions can ask. dr. elmendorf. >> thank you. to all the members of the committee, i appreciate the opportunity to be with you today and discuss c.b.o.'s outlook for the budget and economy over the next 10 years. our analysis shows that the country continues to face very large economic and budget and hn come back and forth from votes so people who have questions dit and i'll turn to the budget. we anticipate that economic growth will remain slow this year, because the gradual improvement that we see in underlying factors will be offset by a tightening of fiscal policy scheduled under current

law. the good news is the effects of the housing and financial crisis appear to be fading. we expect that an upswing in housing construction, rising real estate and stock prices an year, because the gradual improvement that we see will he faster cycle of employment, income, consumer spending and business investment during the next few years. however, several policies that will help to bring down the budget deficit will represent a drag on economic activity this year. the expiration of the two percentage cut in the payroll tax, the increase in tax rates in income above certain thresholds and the cuts in spending scheduled to take effect next month. will help to spur a

faster cycle of employment,

>> by 2023, spending reaches 23% of g.d.p. compared with 41%. what does this mean for federal debt? we project debt held by the public will reach 76% of g.d.p. this year, the largest

percentage since 1950. under current laws we projected debt in 2023 will be 77% of g.d.p., far higher than the 39% average and it will be an upward path. such high and rising debt relative to the size of the economy is a significant concern for several reasons. first, high debt means that the crowding out of capital investment will be greater. that lawmakers will have flexibility to use tax and spending policies to respond to a recession or war and there will be a heightened risk of a fiscal crisis in which the government will be unable to borrow at affordable interest rates. for example, if lawmakers eliminated the automatic spending cuts will be expected

place in march, prevented the sharp reduction in medicare's payment rates for physicians scheduled for next january and extended the tax provisions that are scheduled to expire, without making any other offsetting changes in budget policy then budget deficits would be larger and debt held by the public would rise to 87% of g.d.p. by 2023 rather than the 77% under current law. third, debt might be larger than in our projections because the original would reduce spending to 5.78% of of g.d.p. by 2023 rather than the 77% under current law. third, debt might be larger than in our projections because the original a smaller g.d.p. share than any than in the past 50. because the allocation of discretionary funding is determined by annual appropriations acts, lawmakers have not decided which specific government services and benefits will be constrained or cut to satisfy the caps and doing so

might be quite difficult. fourth, projections for the 10 year period covered in this report do not reflect long-term budget pressures. because of the aging of the population and rising health care costs a wide gap exists between the future costs of the benefits and health care costs a wide gap exists between the federal government especially in the form of benefits and the tax revenue that people have been sending to the government. it is possible to keep tax revenues at their historical average share of g.d.p. but only by making substantial cuts relative to current policies and the large benefit programs that benefit a broad group of americans at some point in their lives. it is possible to keep the policies for those large benefit policies unchanged but only by raising taxes substantially for a broad segment of the

population. deciding now what policy changes to make to resolve the imbalance would give households and businesses time to adjust their behavior. thank you. >> thank you very much. we will do rounds of questions and will do my best to keep everybody here at five minutes. i want to begin with the question of sequester, our focus should be on jobs and the economy not ash trearble creating pain for american families. in your report and to begin wit question of sequester, our focus should be on jobs and the economy not ash trearble creating pain for american families. in your comments you have made since, two things, the first is even with congress having eliminated the fiscal cliff, substantially for a broad segment of the we don't cliff that growth will be half of what it should be and the second is the loss in economic growth. the fiscal tightening is more than just the sequester but the sequester is a major part of it and it is harmful to our economy, families and our national security. it seems obvious to me that the answer is to replace the

sequester with a phased-in approach that includes equal amount or more and smart sustainable cuts and additional revenue. my question tore you this morning, given that c.b.o. notes that it expects a substantial slowdown in economic growth this year because of fiscal tightening wouldn't it be preferable to replace the sequester with a package of savings that is targeted rather than across the board so it occurs when the economy is on a stronger footing? >> if the sequester were replaced with a comparable amount of deficit reduction that were phased in, that would be better for the economy in the near term. the matter of how the -- what the composition of that fiscal tightening is ask affect the economy as we have done

different ways of spurring economic growth and jobs. we talked about the different sorts of effects, the components and spending policies can have on the economy. the composition bears very importantly on what you and your colleagues think we should and should not be doing and where our resources should or should not be devoted. there are important choices in addition to the economic effects. >> for the record, it's my recollection that you, have advised congress smarter ways than through arbitrary across the board cuts? >> we don't make recommendations about policy. we have noted that across-the-board the cut doesn't give you the chance to choose where you think the government should be spending money on behalf of your constituents. that is a matter of -- not a matter of economic analysis but allowing you and your colleagues to set the course of the federal budget. >> in my opening comments i talked about the improvement in

health spending in c.b.o.'s projections and i noted that lower health spending has resulted in revisions that lowered spending in medicare and medicaid about 15% in 2020. the centers for medicaid and medicare services have reached similar conclusions showing national expenditure growth rates at below 4% levels, levels low between 2009. those are encouraging signs and we are hearing from providers and your predecessor that significant innovation is already under way. i alluded in my opening statement and i give you a chance to comment on this improvement and what led c.b.o. to make those revisions? >> there has been a marked slowdown across the health care system. we see this in private insurance costs. we see this in medicaid and

medicare and within medicare, we see it in part a which pays for hospital services and part b, doctors' services and part d, prescription drugs. it has been underway for several years. we are working to try to understand better the sources of that slowdown, the causes of that slowdown. our current assessment is part of that comes from the financial crisis and recession, which reduced the income and wealth that people have to spend on health care, but a significant part is more structural in nature and involves underlying changes in the way that health care is practiced and delivered. but challenge for us and others is to understand how much of those structural factors represent a transient fen no, ma'amon and how many represent the more enduring fen no, ma'amon and we don't know at this point.

the spending in medicare and medicare in 2012 was 5% what we thought what it would be in 2010. we have taken out the slower growth rates over the coming years and marked down medicare and medicaid spending by 15% in 2020 because of these reasons. there are other legislative factors and changes. but because of what we see happening in the health care sector, we marked down growth by about 15%. we have all -- >> i have to cut you off because i have to limit everybody to five minutes. i appreciate that response very much and turn it over to senator sessions. >> thank you for your insightful reporting comments. they are very important to us. i know c.b.o. has worked hard in

projecting growth rates and that's how you evaluate the impact of a budget and what we kill do financially over the next several years. we accept that as a reasonable way to do business, not perfect, but reasonable and i guess it's fair to say that you worked very hard to create an accurate picture. >> my colleagues and i do, senator. >> $616 billion tax increase averaging $60 billion a year extra income and having recovery from the recession, slowest in a decade, but some recovery and that results in a lower deficit that results in a lower deficit as you have reported to us. by 2015, the deficit is projected to be $430 billion, the lowest you project over 10 years. that's slightly below the highest deficit president bush ever had in his eight years. and you have gpped growth projected at 3.%, last year was

2.2. but after 2015, three years from now, the deficits start a rise again, increasing every single year almost 10% a year and would more than double over the following eight years to $978 billion, is that correct? >> yes, that's right. >> and you don't see unless something changes, any improvement in the outyears but your report would indicate that your report the upward trajectory -- and is that an unsustainable path? >> as others have said, debt cannot rise indefinitely as a share of g.d.p. and our projections show debt rising relative to g.d.p. in the back half of this coming decade. >> so i think -- and it

increases the risk as bowles and simple son told us was inevitable if we don't change this unsustainable path, would you agree? >> in the longer term projections that we have done in past years, we have shown debt rising relative to the g.d.p. we have not updated those projections but what we show at the end of the decade and debt would continue to rise as a share of g.d.p. >> under your analysis, revenues are growing and you show solid increases and your growth rate of revenues for the government basically runs in harmony with the g.d.p. increase. as the economy increases, people pay more receive news. if it declines, revenue would

decline, is that fundamentally correct? >> yes. >> even if tax increases were enacted, i think it is important for us to understand, if tax increases were enacted that were large enough to balance the budget by 2015, isn't it a fact that under your analysis and assumptions, a deficit would begin to return that year or the next year and it would increase each year over that 10-year budget? >> it depends on the trajectory of the tax increase that you have in mind. the tax increase is a fixed number of billions of dollars per year. yes, other factors would continue to push up. >> is a fixed number of billions of dollars per fundamentally, isn't it tru they are that the deficits continue to rise and rise increasing faster the economic growth? >> yes. in our projections -- >> spending is increasing at a rate higher than you project to

increase. spending you will be increasing 6 or some percent and growth in the outyears, you average about two or so. and substantially less. >> we show spending -- after the middle of this coming decade, spending continually rising as a share of g.d.p. there's no reason to expect that to turn around because the fundamental drivers are the rising number of americans collecting through these benefit programs and the rising costs of health care costs per beneficiary. >> to my colleagues, this is the reason why i think it's accurate to say we have fundamentally a spending problem rather than a tax problem, because if your revenue is not going to keep up with the spending because we are on an automatic course through entitlements and other programs and our desires to spend more, then you are not going to get the country on a sound path.

mr. elmendorf, that, i believe can slow the economy back in 2009. you wrote senator greggg stating the stimulus would have an economic boost in the short-term. this pushing out of stimulus money, but the cost of borrowing that money would become a drag on the economy, you told us. in fact you said by even next year, 2014, i believe is what you projected it back then, the benefits of the stimulus spending would be completely gone and there would be left a drag permanently on the economy. since there is no prospect of paying down that debt, we will have some drag, how much we could dispute, permanently roughly of that debt, is that not correct? >> yes, senator. cutting taxes or boosting spending that stimulates the

economy are not offset by a tightening of fiscal policy, the extra debt that is accumulated will be a drag in the long run. >> thank you, madam chairman and the other debt becomes a permanent drag on our growth threatening the future of employment for millions of americans. >> i would like to inform the committee members, the way we are going to work in this committee as in past tradition, by seniority before the gavel is hammered and order of arrival after gavel. we will begin with senator sanders. >> thank you very much, doctor, for being with us. just a few questions, and if you could give me some brief answers, is it fair to say one of the reasons we have the deficit today has to do with two wars that were not paid for, huge tax breaks, much of which went to the wealthiest people and medicare part d program that

wasn't paid for and wall street recession with significant declines in revenue, we went from a surplus at the end of clinton to where we are today? >> yes, senator. >> in terms of unemployment, the number, roughly 78.8%, but would you agree if you looked at real unemployment, people who are working part-time when they want to work full-time, they are looking at maybe 14%, is that a full statement? >> yes. >> we are in the midst of a major recession.

the debate that is taking place, as many of my republican friends believe that the answer to the deficit problem, which all of us agree is a serious problem is to cut social security, cut medicare, cut medicaid and cut programs for children, that is true, one way to go forward. some of us believe that we have got to take a look at revenue and the fact that at 15.8% of g.d.p., revenue today is the lowest point it has been in almost 60 years. some of us believe we have to take a hard look at huge corporate loopholes that before you cut a woman in vermont who's living on $15,000 a year social security, you may want to end some of the loopholes that enable the bank of america to stash their money in the cayman islands. that's what the debate is about and confirm that my information is right. in 1952, 32% of all revenue generate nd this country came from large corporations. today that number is 9%, does that sound accurate? >> i don't know that fact. >> in 2011, corporate revenue,

as a percentage of g.d.p. was just 1.2%. madam chair, you remember many of our corporate friends complaining how they are overtaxed. 1.2% of g.d.p. happens to be lower than any other major country in the oecd. people are saying, we are paying 35%. there is no corporation that pays g.d.p. happens to be lower than any other major country in the oecd. people are saying, we are paying 35%. there is no corporation that they have f they do, to get rid of their accountant and the number on profit is 12%? >> you are right that the statutory tax rate in the corporate tax code and average share of profits paid in tax by companies are quite different, but i don't know the numbers. >> let me see if you know this one. in 2011, my understanding is that corporations paid just 12% of their profits in taxes, the lowest since 1972, how's that? >> that sounds about right. >> again, the choice, really in the middle of a recession, you want to cut social security

benefits and medicare benefits or when corporations today are paying 12% of their profits in taxes, the lowest since 1972, do we think it might make more sense to ask our friends in the corporate world to pay a little bit more? another question -- my understanding is that one out of four major corporations, profitable corporations in this country in 2005, the last statistics i have seen -- i'm sorry i don't have closer ones, paid zero in taxes, does that sound right? >> i'm sorry, i don't know off

hand. i can look these things up. i don't carry them in my head. >> my understanding is we are losing and introduced legislation to remedy this. losing $100 billion a year in revenue. a year by companies offshoring their profits in the cayman islands, bermuda and paying zero in taxes. >> again, senator -- >> i know that. do you think it is a legitimate area to pursue the fact that we have companies like bank of america and virtually every major corporation stashing their money in the cayman islands and paying zero taxes. >> it is a legitimate issue for the congress and we released a report last month that reviewed the pros and cons of changing the tax system. >> i would just conclude by saying we have a great philosophical difference in this room and some of us think when the wealthiest people are doing well, when corporate profits are at an all-time high, we might ask those folks for more revenue rather than cutting back on the most vulnerable in this country. >> thank you. senator enzi. >> i want to thank you for this great book.

as an accountant, it has a lot of numbers in it. it does lead to a lot of technical questions and i would rather submit those. >> we are happy to respond that way. >> i still have a que questions and senator sanders brings up one, are we paying out more in medicare than taking in? >> as you know, the dedicated taxes from medicare cover the part a -- are designed to cover the hospital spending and the hospital insurance trust fund is in fact losing money every year. the other parts of medicare have no dedicated financing. they are funded by beneficiary premiums and general revenue transfers. >> how are we doing on what's paid in and what's going out? >> the dedicated taxes collected for social security are less than the benefits that are being paid out. >> anything in sight where that's going to change?

>> no, nor. senator, that will continue. >> on the c.b.o. report, receive news are projected two increase between 2013 and 2015 and growth in the economy is expected to be 1 .4% and accelerate. i want to ensure we don't leave this hearing thinking there is a direct link through increased revenues through tax hikes and increased economic growth. to what extent the increased taxes recently enacted and that pulled money out of the hands of employers and employees have a negative impact on your economic growth projections? >> we think the increase in

taxes is slowing the economy this year, just as there are planned reductions in slowing the economy this year and other deficit reductions are good for the economy in the medium and long run. that is one of the difficulties colleagues face. >> the c.b.o. report indicates that after the economy adjusts this year to the fiscal tightening underlying the economic factors that will lead to more rapid growth, 3.4% and -- can you walk us through your analysis to your conclusion that the economy will adjust and not over a longer period of time due to the tax increases that were enacted earlier this year? >> there is a growth of the underlying potential of the economy and then there is some catchup from the current level output which is below that potential which amounts to putting unemployed workers back to work, making better use of the factories and offices. both are at work. we think that the underlying

forces driving the economy are finally after a long lingering effects of the financial crisis and the housing bubble, we think those are strengthening and pull the economy back up towards a potential output and put people back to work but only grally over the next four, five years. the tightening of fiscal policy is reducing deficits and a lower debt that will result will be good for the economy later on and true that the higher tax rates that will be in place because of the expiration of tax cuts and higher income people, those higher tax rates will represent some drag on the economy and we incorporate those factors in our baseline projections and analysis in the effects of alternative policies, debt on the economy and effect of tax rates. >> few more follow-ups on that one. but slightly different. the president recently said in the absence of a larger budget

deal, congress should pass the smaller package of spending cuts and tax reforms that would delay for a few months the sequester slated to go into effect. it is keep us competitive into it is anticipated the tax reforms means closing what the president perceives as loopholes that we have talked about in the past as the ability to make corporate adjustments in the tax rates to internationally and it to what extent would raising taxes have a negative impact on the economic growth? >> the biggest issue to think about in terms of the effects of this fiscal policy on the policy in the near term is how quickly deficit reduction occurs and how much tightening and it is true the composition would have the effect of simply raising taxes. of the fiscal tightening, how much spending cuts can matter for economic outcomes but the effect depends a lot on the specifics and we have looked at different ways to

boost the economy and found different effects and spending increases. so i don't want to make any very general statements because it depends on what provisions of the tax code would be changed. >> i'll follow up. my time has expired. >> senator whitehouse. >> welcome back, dr. elmendorf. two quick thing, the first thing is i think it is relevant to the topic you were discussing, europe has gone on an experiment in austerity as gone on an expet in austerity as a solution to the recession and it doesn't seem to be working very well. spain's economy shrank 1.4% in 2012 and contract another 1.4%

in 2013. greece shrank in 2012 and another 4.2% in 2013. italy's economy shrank 2.3% in 2012 and expected to contract another 0.3%. portugal's economy thranching in 2012 and project todd contract another 0.3% in 2013. unemployment is in double digits in all of those countries. although we're not recovering well, we are certainly recovering and see g.d.p. growth. if you look at some of the people who are close to this and looking at it, the conservative another 0.3% in 2013. "daily telegraph," jeremy warner who supported this program has written about britain that they are in a truly desperate state of affairs that demands action. we seem to have the worst of all possible worlds

in with nil growth, with obvious cuts in the quantity and quality of public services, but zero progress in getting on top of the country's debts. the i.m.f. which argued for austerity has corrected itself and says, the chief economist said, we find that forecasters significantly understatemented the increase in unemployment and the decline in domestic demand associated with austerity. the "wall street journal" discussing spain and its austerity program says quote, it threatens a vicious cycle to meet budgets, reducing tax revenue and increasing welfare costs as well as damping consumption. robert frank, who is a well regarded american economist said the cuts scheduled in the sequester are not a way to run a rational government. it is discretionary and slow growth for sure and put people

out of work. in that regard, american enterprise institute said, an abrupt spending sequester could cause a u.s. recession. do you recommend an austerity path at this point? what should we be doing that's different than the european austerity experiment that appears to have ended so badly for them? >> we have not studied each of the european countries and there are many factors that affect their economic performance but the recessions and economic crackses that have occurred in -- contractions that have occurred are consistent with the analysis we have been offering to the congress for many years now that raising taxes and cutting spending at a time when the economy is already weak and the federal reserve is limited in its further options to support the economy, will tend

to reduce output and jobs relative to what would occur if fiscal policy were not tightened in those ways. >> you are predicting a more than 1% difference in g.d.p. as a result of that if we don't manage the sequester properly, correct? >> without any of the fiscal tightening it, the sequester itself represents about six-tenths of 1% of g.d.p. growth and 750,000 jobs by the fourth quarter of this year. >> and one last point, different point, i make it virtually every time we have a hearing and i'll give the abbreviated version and the chairman was kind enough to mention my interest. when we have a health care system that is spending 50% more, when everybody from the president's council of economic advisers and institutes of

medicine said there is $700 billion to be saved, when companies like senator johnson's home state, senator toomey's home state are actually showing the ways to reduce costs by providing better health care, i look forward to work with my colleagues on the other side of the aisle to focus on that. i think when we look at medicare benefits as the solution to our problems, we are misdiagnoseing the problem. we put the wrong cure on it and will do harm and not good and we can focus on trying to make the american health care system at

least as efficient as our next international competitor. >> senator johnson. >> let me brief senator sessions, we all share the same goal here. we want a prosperous american and want every american to build a good life and it's through economic growth. director, in general, don't fax increases harm economic growth? >> it depends what the alternative is, senator. >> i'm talking about -- >> if the alternative is to run large deficient sits, definitely. some other change in the tax code, i'm not sure what the answer would be. >> let me point out a couple of facts. even with the growth in 2009, it has increased sits, definitely. some other change in the tax code, i'm not sure what the answer would be. >> let me point out a couple of facts. even with the growth in 2009, it has increased $388 billion per

year since that time period? >> yes. >> if we would just return to a normal economy that we had in 2007 when there was a percent of our economy, that would add $435 billion per year? >> and when the growth that we have in the economy is an important factor. >> now the tax increase, the punishing of success in the fiscal cliff piece of legislation, in 2014 would raise i believe $41 billion in 2014, is that right? >> that sounds plausible. >> increases tax on the rich is a tenth if we return the our economy to a normal economy? >> that particular policy, yes. >> in your projections, you pointed out that the four-year average is 18% of revenue compared to g.d.p. and your projections are going to get 19%. i would like to point out, we only had 13 instances where revenue hit 19%. but i would like to show a chart here. we have had a wide variety of

top marginal tax rates, the attempt to punish success, which is the wrong way to go. >> in your we are+ is the wrong way to go. pushing. but it's amazing how incredibly tight the average around that 18.in my case, 1% over 50-year average. what makes you think we can extract about 19% of revenue when we haven't been able to do it regardless of how we try to punish success? >> there are a lot of other features in the tax code and one could draw pictures like that that showed rates applying to people. income distribution, set of changes that have been made to what sort of income is taxed, what deductions and credits are available. our projection is under current tax law, revenue will reach roughly 19% of g.d.p.

that is not hard for us to imagine given the way current tax law works. congress has often stepped in and made change in the tax law to bring them back down and you may down that again. >> let me answer senator enzi's question how much more we are going to be paying out in benefits. 2014-2023, $5 trillion in benefits in social security and medicare than we are taking in terms of tax revenue and premiums on medicare. now that $5 trillion compares to $9 trillion of total additional debt. 60%. if you are going to try and address the debt and deficit issue, wouldn't you try to save those plans? wouldn't that be one of the first places you would look? >> it's very difficult if you look at our projections to see how one can put the budget ultimately on a sustainable path

without making significant changes in those benefit programs or in the taxes paid by a broad cross-section of americans. >> let me ask about interest payments, we will be pay-go $5.4 trillion and we are up 5.2%. the average over 30 years from 1970 to 1999, the average interest rate the federal government paid is 5.3%. we have been keeping that low to accommodate all the deficit spending. if we revert that had mean, that would be more than $600 billion per year if we increase our interest rates, isn't that largely correct? >> our own projection has the 10-year treasury rate going to 5.2% in the second half of the coming decade and we show a large increase in federal interest payments. >> that's something we need to be concerned about. what makes you think we won't

hit it a little bit quicker? >> because the weakness of the economy has kept down the private demand for credit and led the federal reserve to keep interest rates low. in addition, there are serious economic and financial problems in europe that led people to put money in this country and an aversion to taking financial risk given ep the events the last couple of years. >> aren't seniors on fixed incomes the biggest victims? >> i don't know, senator. we haven't analyzed that. the people who are dependent on receiving interest payments are receiving lower payments because interest payments are low. >> i have to tell you, it's a delight to have my first budget meeting and delighted to have

director elmendorf here and since you get your only first hearing once. i appreciated your opening remarks, chairman murray, about the fact that budgets truly are a statement of our values and our priorities as americans and for me, that means developing a budget that strengthens the essential pillars of our economy. quality education, affordable health care, retirement security, things we rely on to have a strong middle class. i want to see us develop a budget that holds true to the belief that everyone gets a fair shot and everyone does statemen fair share. i believe that our country faces twin challenges. the challenges of getting our economy or economic recovery, seeing it through job creation and particularly in the private sector and confronting our debt

and deficit and we have to face both of these challenges head on and address them in a bold, yet balanced way. in the past two years, we have made significant strides in achieving a $2.5 trillion bipartisan deficit reduction, but he we obviously need to do more. but that's the trick. that's the challenge. that's the hardest task is how do we forward a set of policies that helps us achieve both of those twin challenges without frustrating the other? i would like to begin by asking you how we approach these twin challenges, these parallel challenges of job growth and deficit reduction? you highlighted in your testimony that there is a large gap between potential g.d.p. and actual g.d.p. and that of years

>> aren't seniors on fixed incomes the biggest victims gap almost as large as it was during the worst of our recession. this means that there is a sharp fall in consumption and government spending and/or investment. additionally we have record low financing costs right now and unemployment levels of above 16% in the construction sector. in terms of economic multipliers, isn't it true one of the best ways to increase growth in the future is to invest in infrastructure today? >> yes, senator. investments in investments in infrastructure, if done in an intelligent manner can provide a real boost to economic activity, not just today when the investment is occurring but overtime as the investment yields returns. >> along those lines, what do you view as the other best economic multiplier strategies -- what gives us the most leverage?

>> well, the most effective way that we know for the congress to boost economic growth this year is to defer some of the fiscal tightening that is scheduled in current law. if that deferral occurs without some offsetting, tightening of fiscal policy later, that will make economic outcomes worse. >> dual twin challenges. you stated in your testimony that this fiscal tightening that we're talking about would restrict g.d.p. growth by 1.5% and cost us two million jobs. your testimony -- you also stated that our unemployment rate would remain above 7.5% through 2014. i have a chicken versus egg question for you. i know they are challenging, but in your view, to what extent is high unemployment a cause of a weak economic growth as opposed to the effect of weak nick

growth? and if high unemployment is a cause of slower growth, what effect wol direct government action to lower our unemployment rate have on our overall fiscal situation? >> we think the high unemployment rate is primarily the effect of businesses not hiring, which is prime aerial an effect they are not seeing the demand for their products and policies that would boost the demand for goods and businesses would encourage businesses to hire more and tend to bring down the unemployment rate. there are policies that could be directed to unemployed workers. we wrote a report on ways to respond and we talked in that report about some of the broad macroeconomic policies and targeted policies to help train

workers, help connect workers to available jobs. our view in that report was that those policies could be helpful for certain people in certain circumstances, but were difficult to implement on a national scale quickly enough to change -- significantly change the trajectory of the overall unemployment rate over the next few years. >> senator wicker. >> thank you, mr. budget director. the president a few days ago proposed a balanced approach to paying foresee questions tration in another way involving revenue increases and a different approach to making the budget savings. what would be the score of the president's proposal in this regard? >> we have not seen a specific proposal. >> i haven't seen a specific proposal. it's hard to score that speech

that the president made, isn't it? >> yes. >> last year, the house actually proposed legislation and passed legislation to deal with the sequestration, is that correct? >> yes, that's right. >> do you have an opportunity to score that? >> we did. but i don't remember the estimate we provided. we provided the cost estimate. >> and the chair suggested earlier in this hearing that we avoid sequestration by restructuring the cuts to let them take effect a little more gradly and involve revenue there. have you had the opportunity to score that proposal by the democrats on this committee? >> we have not received a specific proposal of the sort you are describing. and if we received such proposal and were made public and do an estimate of it, you and all of your colleagues would see it. >> it would be helpful, because it's frustrating to me on the

one hand our brothers and sisters at the other of the end building have proposed specific solutions to sequestration. they have been scored. they have been passed and sat here in the u.s. senate with no action and we have suggestions by the president, suggestions by our friends on the other side of the aisle, but they can't be scored suggestions by the president, suggestions by our have any idea what c.b.o. would think about those. let me just say this. there's a lot of revisionist history when it comes to this period that i participated in as a member of the house of representatives, where we actually had budget surpluses on the federal level.

you would think for the chair's opening statement that president clinton came into office in 1993, proposed balanced budgets, got those balanced budgets and we had eight years of relative fiscal since in the federal government. the fact is, is it not, that president clinton in 1993, 1994 and 1995, proposed in all of those years deficit spending as far as the eye can see, is that correct? >> i think that's right, but my recollection of those budgets -- >> that's my recollection. 1995 budget proposed by president clinton, who takes credit for the surpluses later on, proposed over $200 billion in budget deficits as far as the eye could see and then what happened is. in the 1994 election, the people of the united states elected a republican majority in the house and republican majority in the senate and i know you don't get involved in politics, but let me

just observe that chairman kasich was directed by the speaker of the house was to come up with a tough budget bill and the republican majorities in the house and the senate got the president of the united states to buy into reckconsillings and buy into welfare reform and after republicans took control of the house and senate majority, that's when we had budget surpluses. that's when the budget surpluses began and were never proposed before then by president clinton. . . i recall osama bin laden and al qaeda getting use in a war in twoun -- 2001. and as i recall, it was passed unanimously in the united states senate that we would retaliate in afghanistan and go

into war, it wasn't a bush war, it's something that we all did and all americans supported, one dissenting vote in the house of representatives. so i think it's disingenuous to have revisionist history when in fact we did have this war, we were in an economic recession in 2001. what would a tax increase have done to us in 2001, to pay for that war in afghanistan? it would have been a huge drag on an already tenuous economy, would it not have? >> i'm going to ask you to sum that up really quickly. there's several of house are going to miss. >> it would have had that effect, yes, senator. >> thank you very much. >> i'm going to recess and go over and vote at the end of this vote and the top of the next one and come back. if any members want to come back and ask questions i'll do it between the third and fourth vote. i'll be here. we'll take a quick break. >> thank you, senator.

>> the committee will come back to order, please. and -- [inaudible] will return in regular order but for now i'm the only one here. [laughter] so i'll take advantage of that. of that moment. thank you. good to have you here. >> thank you. >> and appreciate so much the third party bipartisan analysis the c.b.o. brings to our discussions. it helps if we have a common set of analyses to base our discussion and analysis on here in the committee and thank you for providing that. i wanted to start by asking you a question that may not be reflected in the numbers and maybe it can't be. but that's for you to respond to. and that is, we've had a series of fiscal cliffs, if you will,

not only the fiscal cliff, december 31, we have the upcoming concern over the debt ceiling, the continuing resolution and so forth. it seems like we've been lurching from budget crisis to budget crisis. is there any way of majoring that or do you make an attempt to major the impact on decisions made within the economy and perhaps within your models regarding investments and so forth that might drive economic outcomes? >> senator, we do think that the ongoing uncertainty about federal budget policy represents a drag on spending and thus on incomes and jobs. but we don't know how to quantify that effect. there is economic research. we've had some of this presented at our meetings of our panel of economic advisors

that tries to -- starting to build some evidence about the effects that policy uncertainty on the economy have. but that's, i would say, still in a preliminary stage. we don't know how important those effects are. we think the primary source of uncertainty that's holding back household spending and business investment and hiring is uncertainty about the income the households will have and demand for the products that firms will face. but policy uncertainty is probably also playing some additional neglect tifpk role. >> it was interesting to -- negative role. >> it was interesting to see a series of reports regarding retail sales and everything from clothing to other consumer dwoods. that seemed to show -- goods. that seemed to show a significant change and one possible explanation was related to the fiscal cliff and the recognition of what's going to happen in march. another was that the payroll tax changed and folks had 2% less money, they were looking

at their paychecks. do you have any sense of how that -- was that expected? that turndown? whales the best explanation or combination of explanations? >> it's difficult to read too much into the very preliminary data we have for the beginning of this year. our expectation has been and remains that the expiration of the payroll tax cut represents an important piece of fiscal tightening that is good for the deficit over time but is negative factor for consumer spending in the first part of this year. but that is a judgment based on decades of evidence of other changes in demk and how it affects -- income and how it affects spebbedsing. we just don't know enough of what's going on. >> so we're looking at another set of decisions and right now we're on a course to have significant drop in defense and nondefense discretionary

programs. and one idea that's been put out there is, well, instead of reducing spending, let's reduce spending on appropriated programs, if you will. let's reduce spending on tax loopholes. and for some that's reducing spending, for others, increasing revenue. but largely, if you spend money on a tax loophole, it has a corelary in the real world. so it's fair to frame it that way. have y'all looked at the different impact of whether, say, shutting loopholes that give special payouts to oil companies versus cutting food stamps, just to -- an imaginary comparison, how it reverberates in the economy and affects working sneem >> we've not looked at -- people? >> we've not farmally analyzed the macroeconomic effect of closing particular tax loopholes but we have said many

times that the sorts of spending ors that matter most to the economy are ones that directly affect the spending by the government or by households or by businesses. so food stamps are received by people who, as you know, have very little other income. they will tend to spend a very large share of any change, spend more if their blue stamps go up or spend less if they go down, so changes in that way will tend to pass through to changes in spending on a nearly 1-1 basis. whereas most of the tax revenue is collected from people who are not living so close to the economic edge and thus will tend to respond less sharply in their spending for every $1 change in their after-tax income. so in general changes in food stamps will have larger affects on the economy in the short-term than other spending programs and tax programs but we have tax provisions, we've

not looked at the specific example you raised. >> now that we're back in the world in which social security premiums are being paid for directly out of paychecks, completely, the argument is often made that social security , the premium goes into the trust fund, the trust fund lends money out to earn a modest return, comes back, proceed to disbers it when folks become eligible. in that sense is it fair to say that social security does not contribute to the national debt? >> i think that's not right, senator. actually. the payroll tax see receipts that are, as you know, that are going into social security, are less than the benefits that are being paid out. and the interest payments of social -- that social security seesks are a receipt to that part of the government and a payment from some other part of the government. the work that we do, we tend to look at the government as a whole and on that basis, the

debt -- on that basis the program is actually a drain on the budget today. but even if one includes the interest payments and looks at the overall social security balance, that is positive today, so the tax receipts and interest payments together are larger than benefit payments, but that will actually turn around within the coming decade. by about five or six years from now, i think in our projections, the social security trust fund, even counting interest payments, will be running a year-to-year deficit. it will be starting to draw down on the accumulated balances in the trust fund. >> that really does depend on how you view that trust fund. if you view it as an equivalent of a semiprivate entity in which it's truly separate it would be no different than my saving money and spending money from that account in the future and would be separate from the overall debt analysis. i understand that ongoing eternal question of how you frame that. >> again, sir, i would say that even taking the interest onboard, we think that in 2017

the combined oasi and d.i. trust funds will be running a deficit, even including interest payments that they're receiving. so, it's not very far off before even on that basis the program will be in deficit. >> but roughly 20 years before the trust fund itself is depleted. >> more than that, senator, yes. >> let me turn a little bit to the impact of health care. i believe your summary said that if you look at the current deficits which have dropped significantly over the past couple of years, but they're going to double over the next roughly 10 years. from $400 billion-plus to $800 billion-plus and that health care costs are the biggest driver as a result of the pressures of an aging population. one of the things that is common in the medicare system is fee for service.

now fee for service basically says the more services you provide, the more profit you make. so whether you're building a piece of military equipment or running health care, it's an incentive to spend a lot, not necessarily to spend wisely. has c.b.o. done an analysis of the impact of fee for service on the cost of health care and the savings that may result from changing that structure? >> senator, i think there's a widespread view among analysts that moving away from fee for service to paying providers for handling an overall medical condition, rather than for each individual service they provide, by paying them for providing that overall bundle of care in a high-quality way, that sort of movement would be a great boone to our efficient use of health care dollars. the work that we've done, i think the crucial question is what the movement is to. is what alternative method is put in place. so, as you know, in the affordable care act, there were

a lot of changes made in the fee for service part of medicare, including a number of changes in how providers are paid, that represent moves away from a traditional fee for service approach. and we estimate that some of those changes would indeed save the federal government significant amounts of money. but i think the challenge now that you and your colleagues face is what other specific changes in medicare you might make. and as we work with the staff of this committee and others on potential changes in medicare, we and your staffs are looking at different ways of changing the fee for service system. but just what the federal changes should be to induce the sort of changes in the delivery of health care that people have in mind is not so straightforward. and i think that's a real -- that's a fundamental challenge. >> thank you very much. i think given your analysis and that of everyone else that these are going to be the big

drivers. i'm sure members will be looking to the details that you all produced to try to understand the policy options. with that our chair has returned. so i'll return the committee to chairman murray. >> thank you very much, senator. we apologize to everybody. there were votes ongoing. some members i believe were coming back. we're trying to get a's -- an assessment as quickly as possible on which ones are returning. if you wouldn't mind being flexible. i believe that senator partman will be arriving shortly. i'll turn it over to him the minute he gets here. i believe senator warner also was going to return. if there are any offices that know whether their senator's returning, it would be really helpful to us so we can conclude this farrell qukly as we do have votes ongoing. while none of my members are here, i will take this opportunity to ask you several questions but again i will reling wish the minute someone walks in -- we link wish the minute someone walks. in some of my colleagues claim

that after the fiscal cliff deal which raised about $600 from the wealthiest taxpayers, the tax discussion is somehow finished and some point to c.b.o.'s new budget outlook noting that projected revenues will rise above the 40-year historical average of 18% of g.d.p. but this argument really ignores some really important facts. it's true c.b.o. expects revenues to average 18.9% of g.d.p. over the next decade. it's also true that the last five times we've bald the budget revenues have been much higher, between 19.5% and 20.6% of g.d.p., correct? >> yes, that's right. >> ok, and their argument also actually fails to take into account for the reality that the baby boom generation is entering its retirement years and i want to paraphrase you but you have noted that the past combination of policies regarding federal spending and revenue can't be repeated when it comes to the federal budget going forward, which i take to mean that we are interesting a

new phase. with respect to our fiscal pressures. that reality was recognized by bipartisan budget groups, simpson-bowles and the senate gang of six both did and they proposed substantially more in revenue that will be generated -- than will be generated by the 2012 fiscal cliff. so, my question to you is this, if we were to hold revenues at an average of 18.9% of g.d.p., as you estimate, not to ask for a penny more of contribution from either the wealthiest of americans or from some of the most egregiously wasteful loopholes in the tax code, if you could lay out for this committee some of the policy choices that congress will have to face within a relatively short period of time? >> yes, senator. if tax revenues are maintained at their historical average of share of g.d.p., or even at the roughly 19% that we project for the end of this coming decade, then puttinging the federal debt on a sustainable long-run

path would require substantial cutbacks in the benefits and services that people receive from the government. relative to what would happen under current law or current policies. the numbers about the increase -- for the increase in beneficiary ears of social security and medicare are just striking. we estimate that by 2023 there will be about 40% more people receiving social security and medicare benefits than received them last year. with a 40% increase in the number receiving benefits, the total cost will be much higher or the benefits will have, per person, will have to be much lower. and when we look out even over the next 25 years as we did in our long-term bubblet outlook last year, we were clear that the biggest factor pushing up spending was the aging of the population and the growing number of people who will be eligible for these benefits under current law. the rise in health care costses per person, in excess of g.d.p.

growth per person, is a smaller factor, not an insignificant one, but a smaller factor, actually, than the aging of the population. so over the past 40 or so years, leaving aside the development of the past few, but over the 40 years leading up to that, this country had an expansion of social security and health care programs that was essentially financed by a reduction in military spending as a share of g.d.p. it was a direct flow of money. but if you looked at the overall government budget, the decline in defense spending as a share of g.d.p. turned out to be essentially the mirror image of the increase in federal spending on social security and the big health care programs. between about 1970 and 2007. but that is a pattern that can't be repeated and it can't be repeated because we now have a much sharper increase in the number of people who are beneficiary ears of these programs, so the underlying forces pushing them up are

stronger. week of also reduced defense spending to a much smaller share of the economy than it has been before. so that method essentially of dealing with the rising cost of these programs isn't available at that order of magnitude and this is not to say that changes can't be made, of course, in defense spending or other things. but something different will have to happen going forward. and under current law the -- all federal spending apart from that, for social security, and the big health care programs, and interest payments, but everything else the government does is already on track to become a much smaller share of the economy than it has been in the past. so even as things stand in these projections, the role of the federal government over the next decade relative to the past decades is sharply different, much more spending on the benefit programs, particularly for older americans, and relative to the size of the economy on a track to have less spending on defense, but also nondefense discretionary spending and the

mandatory programs, apart from social security and the big health care programs. so, the share of g.d.p. that we represented by, in particular, nondefense discretionary spending and defense discretionary spending at the end of the coming decade will be lower than they've been at any point in my lifetime, which is a period for which the government's been collecting data on that basis. so, there's a really profound shift under way, even under the current law which isn't enough to put the debt ultimately on a sustainable path. so if you and your colleagues want to put that on a sustainable path and also if you want to undo some of the things that are current law, like the sequester, then you will need to make substantial changes either in those large benefit programs or in the share of g.d.p. taken out by tax revenue. >> ok. let me check with our staff, do we know if any members are returning?

>> i will ask you one more question and i would just like to notify all senators, you've got about three minutes to let me know if you're returning or your staff, otherwise i'm going to ask one more question and adjourn. doctor, i did want to ask about the issue of sustainability as well as the second report you released last week on macroeconomic effects of alternative budgetary paths. i want to make sure that this committee aggressively addresses the fiscal challenges we face. but toad it in a way that protects the recovery, puts in place sensible reduction and makes sure the middle class gets a fair deal. the groups like simpson-bowles and the senate gang of six prioritized protecting the economic recovery. they proposed to put our debt

on a stable downward path without making immediate drastic cuts. and that approach would really allow us to make smart cuts, smart investments, and ask that everybody pay their fair share. your report suggests that in the near term, large spending cuts would have a negative impact on growth. an effect that would be concerning given the relatively weak state of our economy today. how might we avoid that negative impact while still achieving the benefit to the economy of deficit reduction? >> i think, senator, to provide more support for the economy in the near term, without damping long-term economic prospects, you and your colleagues could pursue a path of less fiscal tightening this year and next, accompanied by greater tightening later in the coming decade. and there are many different combinations of policies that can be used to achieve that. but i think that sort of path that has less fiscal tightening

now and more later could be good for the economy in the short-term and also could strengthen the economy in the medium term and long-term. >> ok. c.b.o.'s analysis of alternative budgetary paths suggests that budget savings of about $4 trillion over the next decade, on top of the sequester, and the savings already achieved in the last congress would be necessary to come close to eliminating the deficit by 2023. what would be the consequences of implementing an additional $4 trillion in deficit reduction, particularly if certain parts of the budget were to be excluded like defense or revenue? >> achieving that amount of deficit reduction would involve fundamental changes in some significant pieces of the budget and the more pieces that were taken off the table, the more significant the changes would need to be in the remaining pieces. but the precise consequences, of course, on the benefits and services provided around the

economy would depend on the nature of those cutbacks. >> right. let me check with my staff to see if there are any senators returning. ok. i think the votes contracted everybody's schedule this morning. doctor, i know you will answer any questions that are given to you in writing. i do want to thank all of our committee members for participating today and thank you for being here, as well as all of the staff of the congressional budget office. i know the hardwork you put into preparing the budget outlook and helping our committee. for all of our committee members, i want to remind all of you we do have our next meeting tomorrow at 10:30 to hear from members of the public and experts to learn more about the impact of budget decisions on families and communities and as i said earlier i'm committed to making sure that families and communities have a voice in this process and that their values and perspectives are heard. finally, for the information of all my colleague, additional

statements and/or questions to the doctor for this hearing record are due by 6:00 p.m. today to be submitted to the chief clerk in room 624. with that, again, doctor, thank you very much and i will adjourn this hearing. >> thank you, senator. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] >> having observed a steady improvement in the opportunities and well-being of our citizens, i can report to you that the state of this old but youthful union is good. >> once again, in keeping with time-honored tradition, i have come to report to you on the state of the union. and i am pleased to report that america is much improved. and there's good reason to believe that improvement will continue. through the dains to -- days to come. >> my duty tonight is to report on the state of the union. not the state of our government.

but of our american community. and to set forth our responsibilities in the words of our founders to form a more perfect union. the state of the union is strong. >> as we gather tonight, our nation is at war, our economy is in recession and the civilized world faces unprecedented dangers. yet the state of our union has never been stronger. >> it's because of our people that our future is hopeful, our journal journey goes forward and the state of our union is strong. >> tonight president obama delivers this year's address live on c-span. with our preview program starting at 8:00 p.m. eastern and the president at 9:00. followed by the g.o.p. response and your reaction. the state of the union tonight on c-span, c-span radio and c-span.org. you can also watch the address

and republican response live online and in high definition at c-span.org. it will be available on demand through the website, along with the tea party response from senator rand paul and you can use the website to make clips and share them via social networks an email. that's at c-span.org/sotu. and join in our facebook discussion prior to tonight's state of the union. our question, do these events matter? let us know what you think. >> i think we hold up brown as this amazing feat that we accomplished this, that we rolled back segregation and then we look at what happened afterwards and we see how incredibly difficult it was. devicive in some ways but also that you had this very incremental progress after that, that was very frustrating i think to people. and so it's seen as a great victory but i think also it's

important, you know, doing this research to really look back and see what we didn't accomplish yet. and so when i was looking at these seg -- at desegregation and how it was finally implemented, 20 years later after brown actually was handed down, 20 years later, the way these programs are set up still maintains white privilege. >> sara garland chronicles the only federal lawsuit brought up by african-american parents to challenge school desegregation in "divided we fail." part of three days of book tv, president's day weekend on c-span 2. >> earlier today, defense secretary leon panetta spoke at a pentagon farewell ceremony. he talked about north korea and called on congress to end the uncertainty posed by pending budget cuts known as sequestration. mr. panetta will stay in his

position until his successor is confirmed. president obama has nominated former senator chuck hagel to be his replacement. this is half an hour. [applause]

>> halt. present. halt. ♪ o say can you see by the dawn's early light snule what so -- what so proudly we hailed at the twilight's last gleaming whose broad stripes and bright stars through the perilous fight o'er the ramparts we watched were so gallantly streaming and the rockets red glare the bombs bursting in air gave proof through the night that our flag was still there

o say does that star spangled banner yet wave oaer the land of the free and the home of the brave ♪ >> please be seated.

>> ladies and gentlemen, the director of administration and management, mr. michael rhodes. >> well, welcome, everybody. thank you very much for being here today. as we have an opportunity for the secretary's farewell address to the pentagon community. from the most senior to the most junior individual out here, you represent one team. one focus. and that is the common defense of this nation. i'd be remiss if i didn't thank all those that were involved in putting today's ceremony together. all those unsung heroes who sit behind the scenes and make things happen. certainly our protocol office, washington headquarters services, their graphics team, communication team, pentagon force protection agency,

military district of washington's joint service color guard, and of course master sergeant juliano with that amazing rendition of the national anthem. we thank everybody for bha they have to do. since the founding of this nation, a key element of its success, i submit, has been the willingness of its citizens to do whatever was necessary to commit themselves to the public good, to public service and public defense. one of those citizens, in 1964, raised his right hand and swore to support and defend the constitution of the united states against all enemies, so help him god. then lieutenant panetta, i don't know if he ever imagined at that time that 47 years later, just down the hallway there, he would raise his right hand once again to become the secretary of defense. in that intervening time he has had a career of public service. one that in 1970, as the director of the office for civil rights, he worked to

eliminate segregation and education, reflecting his moral compass on his early years, went on in another time while he was in the congress, 1988 he authored the hunger prevention act and the fair employment practices resolution. then on through in a time in the mid 1990's and late 1990's he was a director of office of management and budget and was a key negotiator in the development of the framework that actually allowed us to have a balanced budget. in fact, a budget surplus. that actually happened once. throughout that time i would submit a key characteristic and a key trait in secretary panetta's efforts has been inclusiveness. the strength of bringing people together versus separating them. that has been a hallmark throughout his tenure and that certainly will be a hallmark of your time as secretary of defense. he's been focused on keeping

america safe and making it a better place. sometimes that requires very hard decisions. decisions to put men and women who wear the uniform of this nation in harm's way. but as he's made those decisions, he's done so with compassion and concern. and it's why we enjoy working for them. in fact, i think one thing that's reflective of secretary panetta's personality is something that my wife actually likes best about you, sir, and that is his laugh. whenever we see him, she says, make him laugh. [laughter] it's because your laugh is true. it's real. and it's sincere. and that reflects who you are as a person. the people gathered here today, they represent over two million men and women in uniform, they represent the nearly 800,000 civilians, all those around the world who serve under you, and we all gather here today as

deputy secretary carter likes to represent, as a family, as your family. and, sir, we are gathered here today quite frankly to say thank you, to thank you for the honor of being able to serve with you, the honor of having your leadership, the honor of all that we've been able to accomplish together. so, sir, your family is a symbol and, ladies and gentlemen, the 23rd secretary of defense, the honorable leon panetta. [applause] >> thanks very much, mike. i really appreciate the kind introduction. and, ladies and gentlemen, leaders of the department, civilian employees, military officers and enlisted, let me just thank you all for coming

out today and to be a part of my ability to say thank you. and i guess that's the reason i'm here. very simply is to say thank you. for your service, for your dedication, for your commitment . for the willingness of those men and women in uniform to put their lives on the line in order to protect this country. i'm a believer that our fundamental mission here at the department of defense is very simple. it is to protect and defend the united states of america. and to keep our country safe. and because of your great work,

because of everything you do, we can say with pride that we have kept our country safe. and that's what it's all about. and that's something that i will be most proud of, as i head back to california, as the knowledge that everything we have done has helped keep our country safe. i want to acknowledge not only your great work but i also want to pay tribute to the love and support of your families. as i've often said, none of us could do these jobs without having those we love support us in this effort.

it's true for my wife and family and i know it's true for your families as well. and those you love. these are tough jobs. they take a lot of work, they take a lot of dedication. we face a lot of pressure. we face a lot of challenges. and sometimes it demands that we go off to the battle front, long distances away from home, and yet throughout that, knowing that our families are there, knowing that they love and support us is what gives us the ability to do this job. and so my deepest thanks go out not just to all of you, but to your families. they are part of our family, they're part of our pentagon

family. and i thank them from the bottom of their heart -- of my heart for their sacrifice and for their dedication. over the last 19 months i've had the privilege of working with many of you and meeting many of you. i've had the great honor of being able to go out and greature troops on the battle front -- greet the troops in the battle front and meet the commanders. i've come away from those experiences with the deep respect and admiration for all of the dedication and sacrifices that our country is willing to make in order to keep us all safe. every day i see the people in this department working and fighting together as one family , united behind our mission of protecting our country.

i know this can be a difficult place to work. this is one big bureaucracy. it's a big building. there are a lot of obstacles. there's a lot of red tape. in building -- in a building that's this large, just finding your desk can be a challenge. i'll never forget a few month after i came into the job, i was here at work on the weekend , left my office to see if i could find some food someplace and spent the next hour trying to find my way back to my office. dwight eisenhower once told the story of a woman who was pregnant, who went up to one of the guards here at the pentagon and said she was very concerned

that she might deliver her baby and wanted to know where she could find a doctor. and the guard said, what the hell are you doing? you shouldn't have come into this office building that pregnant. and she said, when i first came into this office building i wasn't pregnant. [laughter] despite these obstacles one of the most rewarding parts of my job has been to see the people who are willing to fight to keep america safe. that's our number one job. and i am so grateful for those that do that. i think we are, as a nation, strong because there are men and women that are willing to put their lives on the line in order to protect this country. that is our great strength. that's what makes us strong.

and the fact that they're out there, the fact that they are exercising tremendous bravery, tremendous currently and are willing to do everything they can to fight to protect this country, that is what makes america strong. that's what makes us strong. and i've often said, if others who were in leadership positions in this town could just look at the men and women who put their lives on the line every day to fight for what they think is right and just -- just take a little of that courage, a little of that bravery, to take the risks that are necessary to solve the problems in this country this country would truly be on the right path for the future.

it's because of their example and their inspiration that i think this country is strong. for the civilian work force, i also want to pay tribute to all of you. you do everything you can to support our mission, you support our war fighters down range, you don't get a hell of a lot of public recognition, but the fact is your efforts make a difference. we could not do this job without the civilian work force. you're the unsung heroes of this nation. and whether you're a contractor or a logistics specialist or an i.t. expert or an acquisitions manager or a food service professional or a force protection agent or one of the countless others working together as a team, you are an important part of our success.

i am forever grateful and proud of what we've been able to accomplish together. we've developed and begun implementing a new defense strategy for our defense force of the 21st century. that will sustain the strongest military power on earth and strengthen our ability to meet our responsibilities and the challenges we face in defending our country, toimplementing fiscal discipline. i have never -- to implementing fiscal discipline. i have never believed we have to choose between our responsibility to national security and our responsibility to fiscal discipline. we can do both. and we have done that. in developing a defense strategy that implements the key elements that we need for the future.

agility, the ability to deploy quickly, the ability to be on the tech willing edge of the future -- the technological edge of the future, the ability to have force protection and force projection in the pacific, in the middle east, the ability to have a presence elsewhere in the world, to have rotational deployment capabilities that can exercise and train other countries and develop their capabilities so that they too can provide security. the ability to defeat more than one enemy at a time, the ability to invest in the future. invest in unmanned systems in space and cyber, invest in special forces, invest in the ability to mobilize quickly, invest in the ability to maintain a strong industrial base in this country so that we can have a strong defense for the future. putting those elements together was the result of a team effort by both the military and the civilian work force here and i deeply appreciate their working

as a team to put that in place. because of the progress that we've been able to achieve, particularly with our troops, we've ended the war in iraq, we've given the iraqi people a chance to be able to secure and govern themselves. in afghanistan we're doing exactly the same thing. we're conducting a transition process, plan put together by general allen, who has provided tremendous leadership in that effort. we are on the right track in afghanistan. and we will be able to transition over these next two years to a point where the afghans themselves can govern and secure themselves. we've put tremendous pressure on al qaeda, the enemy that attacked us on 9/11. and we have made very clear in going after al qaeda and the leadership of al qaeda that nobody attacks the united

states and gets away with it. we will continue to pursue them wherever they go. we will make sure that al qaeda has no place to hide in the world. i am proud of the efforts we have made to expand opportunities to those that want to serve our country. if somebody wants to serve this country and is able to meet the qualifications of the job that's involved, then they deserve a chance to serve. as the son of italian immigrants i've lived the american dream. my parents worked hard. they didn't have a lot of education and they didn't have a lot of money in their pocket but they understood the opportunity that america was all about. and if you work hard, if you dedicate yourself to something, if you have a chance to succeed

, then, damn it, that's what being in the united states is all about. having a chance to succeed. nobody guarantees success. but what we should guarantee is a chance to be able to succeed if that's what you want to do. and finally, many of you have focused daily on taking care of our returning veterans and our wounded warriors. caring for our own is a sacred obligation and you're enabling our nation to honor that commitment. the toughest part of this job, as i've said time and time again, is having to write notes to the families of those that have lost loved ones in battle. it's not an awful lot you can say -- there's not an awful lot you can say.

the one thing that i tried to say to each of those families is that their loved one loved them, loved their country and gave their lives for everything they loved. and that makes them a hero and a patriot forever. looking to the future, we have to stay vigilant. because we are going to face some severe challenges in the future. we're continuing -- we'll be in a war in afghanistan for a while still. we've got to confront violent extremism wherever it is. we still are confronting the war on terrorism. and we've got to be rive prepared to -- and we've got to be prepared to confront them wherever they are. we've got the threat of cybersecurity, cyberwarfare, which is a real threat in our times. and can literally threaten to

paralyze the country. that's a real threat. cybersecurity is something we've got to really be concerned about because it is the weapon of the future. we're going to have to deal with weapons of mass destruction and the proliferation. we're going to have to continue to deal with rogue states like iran and north korea. we just saw what north korea's done in these last few weeks, a missile test and now a nuclear test. they represent a serious threat to the united states of america. we've got to be prepared to deal with that. we also face the challenge of rising powers in asia and elsewhere, continuing turmoil in the middle east. if we're going to achieve progress in these areas, we depend on your skill, we depend on your determination to make

our military the strongest and the most respected in the world. and we also need national defense in the united states -- the national defense of the united states needs the partnership of the congress. this is a partnership in a democracy. and as you know, because of our leaders in washington -- because our leaders in washington have not resolved the key budgetary issues facing our country, we are facing a period of budget uncertainty that threatens across-the-board cuts in defense and in domestic programs. i know that all of this uncertainty creates tremendous concerns for you and for your families. i understand that. but i want you to know my highest priority is making sure that we do everything we can to

protect our most valuable asset at this department and that is our people. you. our men and women in uniform and our talented civilian work force. i will continue in whatever capacity to urge the congress to establish some budget certainty. there is no reason, there is no reason why we should engage in a self-inflicted wound in this country. we have the strongest national defense, we've got the strongest technology, we've got the strongest men and women in uniform. there is no reason, no reason why we have to have this budget uncertainty of a legislative mechanism that was designed not to go into effect. because it was so onerous.

so, you have my word that i will continue to fight for the rest of the time i'm in this office and wherever i go to try to urge the congress of the united states to exercise the responsibility that they owe the american people, to do what's right. as i've said before, none of our military's great technology is worth anything without those who acquire it and maintain it and employ it. our military strength is not just measured by our capacity to defeat aggressor or topple regimes with advanced technology. one of our greatest strengths is our ability to partner with other nations to uphold american values abroad and to sustain american leadership across the world. we are the strongest military

power in the world. the world needs our leadership. the world needs the united states of america to lead the world towards peace and towards prosperity. the work you do every day here at the pentagon has a direct impact on our men and women who raise their right hand and take an oath to put their lives on the line for this country. it has a direct impact on the security of our country and it has a direct impact on the security of the world. my friends, it has been the honor of my life to have served with you in this position as secretary of defense. it's been the greatest privilege i've had in my almost 50 years of public service to

be able to represent the people of this department, to our friends and our partners arled the world. -- around the world. because of your dedication, because of your expertise, because of your sacrifice, the united states military is the strongest fighting force in the world. and america will always remain the home of the free and the land of the brave. you will be in high -- in my heart forever. god bless you, god bless the men and women of the department of defense and thank you very much. [applause] >> ladies and gentlemen, please remain standing for the departure of the official party.

>> ladies and gentlemen, the secretary of defense invites you to join him in the pentagon food court for a -- [inaudible] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

host: anita, we'll start with you. how much do we know about what president obama plans to say tonight? do we have much of an indication guest: we have some of ago an indication. i think he'll return to talking about the economy. that's what we're hearing from the white house. he has four things that he's going to focus on but all of them will stress the economic context of it. energy, he'll talk about infrastructure, which is new, new roads, new bridge, stuff like that, manufacturing -- manufacturing, and then he'll also talk about education and making college more affordable. but all of that will be in the context of how can we make our economy grow stronger, how with can -- how can we promote and grow the middle class. host: here's the headline of the financial times d this morning. obama to focus attention on the economy. speech to be heavy on home initiatives. how much of this will echo what we heard at the inaugural address? guest: i think it will be a little bit different from that. i think there were a lot of comments after the inaugural

address that he was aggressive on social issues. he talked about gay rights, equal pay for women, voting rights, and i think you'll see some of that but my sense is that you'll see only the things that sort of can come into an economic context. so while he might talk about immigration, what we need to do as a country on that, it will be in the vein of how does that help the economy? host: how significant is the tone as congress readies its reaction to what the president says? guest: i was at a retreat, the house democrat held in virginia last week, and the president gave kind of a speech to them and a preview what have he was going to say. and he took quite an aggressive tone in terms of the coming standoff with republicans over the sequestration cuts. i was surprised at how feisty he was. he said he's more than ready to engage in the standoff with them over those cuts. if you remember, he wants tax increases and a combination of tax increases and spending cuts and republicans just want to keep it as all spending cuts.

host: if you'd like to join the conversation, republicans can call 202-585-3881. democrats, 202-585-3880 and independent callers, 202-585-3882. so, do we have a sense yet of how members of congress will have responses to what the president says? how much preparation can they do ahead of time to talk to cameras tonight, to respond tomorrow? guest: they're reading all of the store there's we're write being what's going to be in it and they're preparing but you do have to make an audible at the last minute, given what exactly happens in the speech. nobody usually knows, although it has leaked in the past now. there's a precedent for it leaking in full before the speech is actually delivered. but most of the time you're going to have to react as it happens. host: we have a poll on our facebook page asking viewers whether they think the address matters. 57% have said no. 47% have said yes.

how much do they matter here in washington? guest: i think they matter here in washington quite a lot. we were talking beforehand that people don't really seem to remember what the president says the next day. but i think they matter and they set the tone for what's going to come again. you know, come up in the next few months. it's funny, i was talking to some speech writers for past presidents who talked a lot about how people beg to get just a sentence or a phrase in the state of the union address because they feel like that's going to become an issue later on down the line, if it's just mentioned by the president. . host: we are seeing stories about who might be attending the speech. guest: nancy pelosi is bringing a fourth grader who was at the newtown elementary school when the shooting occurred. a number of lawmakers are bringing people from newtown. so there's a definite focus from the congressional democrats at least on the gun-control proposals of the president and

democrats are putting forth. guest: they have not announced the full list, but we started to hear some of the names. there will be some emphasis on gun victims. the parents of the 15-year-old girl killed in chicago a week ago, they will be joining the first lady. she was killed -- she lived a mile from obama's house and she was killed in random gunfire. host: why is this significant who the guests are? guest: there have been several stories in the last few days that show the spotlight on these people. the president often mentions them in his speech. so the spotlight is really on them for about a day and then they go back to their regular life. host: our first caller is george from florida on our republican line. good morning. caller:

now taxes are going to go up. to raise taxes on me will really hurt. when do we know that we are taxed enough? how high can taxes go? i don't think anyone has addressed that. it is not "we" anymore. it is "some" of us paying taxes. host: he's talking about the issue of taxes and how much is too much. do you think we will hear the word "taxes" tonight from president obama? guest: no. for some time now, democrats in general have been using a new term for tax increases, which is revenue.

it sounds much nicer, like sugar to help the medicine go down. that is what he will refer to. and "a balanced approach" is the nomenclature that's preferred by the president. host: here are some stories about the guests. the mother of a shooting victim in chicago will be a guest of the first lady during the state of the union tonight. there's an image of her. the announcement comes a few days after the first lady attended the teenager's funeral. also, looking at guests tonight, we see this -- ted nugent plans to be there. this is a story coming to us from the "washington times."

anita kumar, congress in the representation of the battle being waged in the united states in the house chamber tonight? guest: i think we are. the guests will reflect other issues as well, immigration included, and i have heard about some people that have trouble voting on election day, particularly one woman in florida. she's 102 and had to stand in line six hours, in the miami area. i spoke with most of the guests we have talked about so far, related to the gun issue. the president will talk about that although it will not be his focus. host: what else might we hear him talk about? guest: he spoke strongly about gay rights in the inaugural address, gay marriage. that is something advocates are really looking for him to mention tonight. he has talked about a few others

things, but primarily he mentioned equality for women, equal pay for women, social issues in that regard. but his focus tonight will be the economy. host: betty in pittsburg, kansas, on our republican line. caller: good morning. i would like to say, before an address such as the state of the union, we always have war and more war and threats of more war and threats of bombs and killing, and all these things happening. it is almost like we stir it up before a state of the union address. or when there is a holiday, you

know that the gasoline will go up. what is the point? we need to get out of a privatized war where we cannot control companies -- corporate companies, taking more money, putting more money into the cayman islands for private use. and our soldiers are made up of the poor. they're not made up of congress' sons as they were in world war ii. host: do you plan to listen this evening? caller: yes. but you need to listen to what is not said as well as what is. host: how is what is not said significant? guest: it will be interesting, she was talking about war, i don't think we will hear a lot about foreign policy tonight.

we will hear about the president trying to pull troops out of afghanistan. and we will probably hear about north korea, since that happened today. that might change things a little. i think there will be a good number of things that he will not mention, which is interesting. guest: i have never observed a pattern of wars beginning in conjunction with state of the union addresses. one thing i will watch for this evening is the congressional black caucus. a collection of black members of congress met recently with valerie jarrett on the hill -- she's one of the president's top advisers -- to discuss the state of the union to some extent. the question i have is whether he is going to address black unemployment specifically and things that will help bring that number down. i think that is what the congressional black caucus wants, but i don't know if that is what he's going to do. host: we're talking with anita kumar and jonathan strong. anita kumar is a white house correspondent from mcclatchy

newspapers. host: congressional reporter for "roll call" and covers leaders and has some experience. and was investigative reporter at the "daily caller. " our next caller is republican from georgia. caller: i'm sure it will be the same as usual. host: what does that mean to you? caller: same stuff he always talks about. how he is going to lower taxes. but it's the same stuff.

host: how about rand paul? what about him? caller: i will watch him. i won't watch obama. you watch him one time and you know what he's going to say. host: what do we know senator rubio is going to say? guest: he is a young, great speaker and have been involved in the immigration issue and people will be looking to see how -- how much he'll embrace what president obama says and you know, if he will be willing to go along sm the president is going to talk today that there

are places we can find common ground. the question will be will senator rubio be talking about they can find common ground or a step back. host: jonathan strong, he comes from the capitol, how much is republic leadership having fluns on what he has to say? guest: senator rubio has his own political interests at stake and will probably be running for president in 2016. i'm sure he is laying down his mark in those discussions. host: what is the difference between what he will be talking about and rand paul? guest: is this an alternative, is this a rival address and rand paul has said no. no. no. we are in conjunction and on the same team. the thing to watch out for is

places where the two speeches don't agree with one another, that kind of highlights the republican party is not united on some issues. host: independent caller from ohio. caller: the state of the union address is a waste of time and builds the morale of each individual and doesn't follow through and that's where our unemployment rate comes up because we give up as our taxes are being raised and as well as our immigration. they put a stop on that because it is going to the september 11 and more open who we let come in. the more we let come in, the more our taxes are going to go up in support of each individual who comes into the country. i think there's a few issues

they have to address with immigration. plus there again, getting our troops out of afghanistan, yet, we are going to stay and rebuild. i don't see any sense in keeping our troops around if we are going to rebuild a country or a nation that has come at war with us. host: a response? guest: about immigration, we'll see a strong emphasis on that and talked about his taxes going up. a couple of callers have talked about president obama has said the same things about taxes going up and actually yesterday, republicans started to hear about some of the things that the president was going to talk about, the economy and they said it's the same thing, same thing we have been hearing for four years. it's important for the president to talk about not only sole old proposals but also new proposals, how he is going to

get more jobs created. host: jacksonville, florida, on our democrats' line. caller: i'm calling because i feel like this. republicans are telling you everything they are doing. they want to cut social security and cut medicare but not telling you how they are lobbying the oil companies and sending money across the seas. i don't think republicans have learned that the republicans did not win the election. obama won the election. they want top stop medicare and social security. and i feel like that's unfair to the people that need help in this country. host: what do you want to hear from the president tonight? caller: that he tell the republicans what they're trying to do is not going to work because first of all, the republicans is not telling you

everything. they are still trying to get rich. and i want obama to talk about these things. and then the people, let them know, republicans, you did not win the election. host: our caller from florida, a democrat says he wants the president to go out on the offensive because he has a mandate. will we hear that kind of a tone? guest: reading the tea leaves, one of the interesting things is, you saw a round of stories in the press that said obama is going to pivot back to the economy in this speech. then the white house said we are not pivotting to the economy. one of the republicans hooked on is that obama has pivoted to the economy over and over and over again throughout his presidency and almost an embarrassment to

this point because the recovery is still tepid. guest: it is interesting what the caller has said the president since election day has repeatedly said well, the american people agree with me. i won. every time he introduces a new proposal on gun control, immigration on a balanced approach to the economy, he says, i won the election, the people agree with me. i think we will see that message tonight. definitely, he has been talking about that. >> headline in the "washington times"." momentum to push agenda. republican line. carm karl one question i got -- caller:, one question i got he talks about rebuilding infrastructure and at the end of this month, we are going to face the debt ceiling once again, why is it we send $700 million to cairo to rebuild their sewer

systems? host: what do you think about foreign policy? what's your opinion about other international news snr caller: i'm more caring about the infrastructure of this country and how our jobs are being shipped overseas. i want to know what he is going to do to bring the jobs back. host: do you think we'll hear concrete ideas in terms of jobs. economy on one hand and jobs in the other and our caller wants to hear about infrastructure. guest: the white house said there are four areas of interest and manufacturing is one but infrastructure is another. there are jobs and how to grow the economy are supposed to be there, so we'll see. they said it's a combination of old proposals he has tried to get passed in the last four years and also new proposals. guest: the question on the infrastructure, i think the caller has the idea that a lot of our federal spending is being

diverted to foreign aid and most are surprised to learn it is less than 1% of the budget. if you look at federal spending, entitlement programs, they are putting tremendous amount of pressure on government's responsibilities because it takes a greater and greater share of spending. and if you look at the spending bills, all of the cuts have come out of those other things, not social security and medicare. you will see less of what those things government does. host: congressman paul ryan, v.p. nominee on the republican side, other members on the republican side, what are they doing tonight? guest: they are going to be there in the chamber. i think republicans are going to be on the best behavior.

remember joe wilson, you lie fireworks. they are going to be watching and preparing their response. speaker boehner will be evaluating his next move in the spending battles that are looming and will have to figure it out. host: whatever is said tonight, i hope no one will interrupt the president with a childish "you lie." . blent of time to think of a line. competition to get a seat on the aisle so members can shake the president's hand as he enters the chamber. why is a visual of this important? guest: members have waited six, seven hours. some of those people want a chance to say something, shake

his hand. others want to be on television. they want that moment for themselves. it's kind of interesting. the same group everywhere. guest: the whole thing is a stage and political theater. the aisle seats are symbolic and they want that photo of them shaking the hand of the newspaper to their constituents back home. host: mike is our next caller from the democrats' line. caller: i'm calling about the entitlements. [inaudible] host: do you want to hear him talk about that tonight?

caller: yeah. >> i'm not sure i follow -- you were saying they were changing their minds? caller: everything. cantor and all them guys. guest: the president changed his mind on social security and has taken it back. all of those things are on the table and talked about entitlement reforms and have different ideas. you will see some of that. the president was clear in december when he was working out a deal that didn't happen with the speaker, john boehner, that he would be open for some changes to the entitlement and you will hear about that. that's part of the balanced approach he says he wants to have, includes spending and new tax revenue. guest: in mike's defense, eric cantor did deliver a speech that was built as a rebranding and

fourth time he has rebranded himself. host: how does sequester affect what is happening tonight? guest: i try never to use that word in stories. congress and the white house made a deal two years ago that was never supposed to happen, but there is a whole automatic spending cuts across the board spending and defense cuts and were supposed to go in effect in january but postponed until march unless there is a deal is made. the president is arguing we should postponethe spending cuts for a few more months while we try to work out a deal. this is both to -- this is basically for deficit reduction. the first, that is $85 billion that is going to go into effect.

everybody has said the cuts will not be good for the economy. everybody is trying to figure out a way around them. host: politico says the backdrop is sequestration. old problem and here he is giving addresses throughout the years. sequestration is what is happening behind the scenes and the story says that the leader of the senate, senator reid's is herd them into the corral. will the president use the word sequester and how will congress react? guest: he definitely will be taking this head on. i don't know if he will use the word sequestration. one of the interesting things is that many of the house republicans who are anxious to cut federal spending are surprisingly willing to let these cuts happen.

one of the reasons is the very first spending bill after republicans took control in april, 2010, they secured $30 billion in cuts. "washington post" went back and looked at those cuts and most of them were fake. an example is that the census happens every 10 years and spent $6 billion in 2010 and won't spend money until 2020 but counted the money as a spending cut. you add up the totals of those fake cuts and this is why these republicans want these draconian cuts because they are real and they lost faith that the deals negotiated by their leadership are going to be tested. host: why is this a significant back drop for the speech? guest: most serious issue they have to deal with. there are a lot of other things on the table, but march 1, i don't think the president is

going to shy away from it. two weeks ago, he did sort of an address to the nation in the daytime and had a statement, seven minutes, but basically, he had heard what jonathan said that republicans are allowing these spending cuts to go through. he was very clear that they should not do that and postponethem. but he said that he's not sure they could have a big deal right now, he says we should have a small deal and postponethem for a couple of months. most republicans and democrats say we are sick of postponing but they keep doing it any way. host: republican caller is up next. caller: i'm looking tonight that obama will talk about doing some military cuts in places that haven't been hostile, mainly germany, japan and italy and hopefully, timely, actually

making serious cuts to the war in afghanistan and the fact that we spend $80 billion on the strait of who are muse and that is more than the world combined spending on green energy. i hope some of the money we save towards education here and jobs. host: thanks for your input. someone on twitter said i would like to hear a j.f.k. to the moon speech. we could get to work and get job benefits. might we hear about climate change, energy issues snfer guest: i think you will hear bit. energy is one of the things he will talk about. the caller mentioned education and you will hear about those two things. but how can that grow our economy. for example, for education, they are talking about joe occasional training, tailored to certain

businesses. maybe having something before kindergarten and also that we are going to hear things about clean jobs and clean energy. host: nebraska, independent line. caller: thanks c-span. my thing is, first of all, i'm a former marine. i'm hispanic and i keep watch on these guys talk about cuts and spending cuts and nancy pelosi, i don't know what planet she's on, but she says there is no spending problem. i see greece in our country and it's california, new york, illinois, baltimore, detroit.

and they're not addressing what's happening in those states. and that's the reason i dumped out of the republican and democrat party. and dennis hastert, just before he retired, he drops an earmark boehm, $10 million right on his business interest in illinois. what's up with that? we are all in this together, the president says and he gives his crony waivers. >> anything the president could say tonight that would encourage you? caller: a change in the presidency, the senate and the congress. host: arthur wants to see a complete overhaul.

what does that tone say? arthur is frustrated and tired of business as usual in washington. guest: he referred to the house minority leader, do we have a spending problem. she made a comment that america doesn't have a spending problem and when you talk to republicans, they say america does. the crux is what they are willing to cut. and so i think the president will talk about some of those things. i don't think he will get into specifics like the caller mentioned about different places, but i think he will say we need to some things but he will never say we will only have to cut, he will say there has to be a balanced approach. host: democrats' line. hi, doug. are you with us? doug, one last time. caller: hello.

how are you doing? i heard mr. strong make a statement or an accusation regarding the black caucus and the high unemployment rate of black individuals. and i just thought to myself, this guy is about as worried about the blacks getting unemployment or being unemployed as i am worried about anything else of that nature. host: you mean jonathan strong? he was talking about the congressional black caucus and their priorities. caller: the president should talk about the high unemployment rate. host: should the president do that? caller: it's not a republican issue. republicans aren't even concerned about employment and for him to say that, i wonder why he would say that this morning, is that to bring up an

issue to the president to where he has an issue more or less? host: we'll go to jonathan strong. guest: black unemployment is higher than unemployment for the rest of the country. and i think that is generally most people would say that is a problem. i think that's a problem. host: congressional black caucus raised this. guest: and they have raised it a long time with the president with something they are concerned about and want him to work on. host: how significant is it to get a sentence or two in the speech that people advocate for as opposed to the rubber meeting the road? guest: it's a vigorous process involved. layers and layers of review. anita talked about this, big deal in the policy world, you want that sentence and that

seems to be a commitment for action in the next year. and it's competitive, because everybody wants to be in this speech. host: we have qumplet q. weekly qult and great expectations and look at second terms and say they tend to be more difficult. house and senate roll call votes. which votes prevailed. and you can see the presidents over time back to eisenhower up to bush. anita, how much of this speech is a harbinger to the president's second term? guest: a lot of historians and speech writers say that typically if you have a second term, the first speech of the second term is the most ambitious, most aggressive. you don't have another election and kind of free to say what you want.

and president obama has been more relaxed saying what he wants to say and also you have basically another year, maybe two, to really come out of the gate and get what you want done. we are going to be talking about 2016. this is the one if he wants to talk about whatever ambitious goals he wants to talk about, this is the night. host: houston, texas, independent. caller: i don't even think he has a year or tworks but six months or more. everything he does, his hands are on it. therefore -- we have been hoodwinked to some degree, because the republicans when they are in power, each party in power open up the purse strings. but the president, he can only issue out policy. others hold the purse strings. who's holding the purse strings?

and our problem is if we don't take care of ourselves at home, eventually, how can we help others abroad? guest: i didn't quite get the question. host: who holds the purse strings and who has the power? guest: congress holds the purse strings but whether they have the power that's different. congress wants the president to do what they want and the president wants them to do what he wants. host: you covered the president's visit to leesburg, virginia. how much does the president consult with democratic leaders as he forms his goals for the speech? guest: the president has not consulted very heavily with the house democrats because they are the minority in their chamber and not as important as the senate democrats where they control the senate. but nancy pelosi has made a play

to become more integral into the discussion and has made progress into that regard. host: we have a comment on twitter which says, i hope he talks about bringing troops home to work on infrastructure, f.d.r.-like. host: another call. caller: entitlements and what we are going to expect in the next 20 years for trimming the budget because of the variance -- the valley we have been talking about between republicans and democrats and from california to new jersey and et cetera, et cetera. the rich versus the poor, you follow me there? what are we going to do to help this out, because there is so much of a spread between california and let's say florida or anywhere else as far as the democrats, republicans or anybody else in america?

i have been unemployed for five years and i just expect some action. host: what do you think of senator rubio? caller: he is an upcoming republican. we have had three republican governors here in florida lately. i don't know much about him. host: mike's concerns about entitlements and unemployment. guest: we are sensing a pattern with these callers. it is the biggest issue and whether the president is pivotting back or still talking about, it is the biggest thing on people's minds, what are they going to cut. both sides say they need to cut but a couple of months ago they said they had the so-called fiscal cliff deal and there were loopholes or special interest groups in that package.

it's hard to cut when you sit down to do it. everybody has a pet project. and so, it will be interesting when they sit down to negotiate to see what things will come up. guest: the picture on entitlements -- if you want to see cuts, which it sounds like the caller did, i don't think there is a lot of reason to hope. the president has a few different areas that have been put on the table. one of those is called chained c.p.i. and change is how social security payments increase over time with inflation and reduce how fast those payments are increasing. that is the only thing seriously on the table. guest: the speaker had come up with that idea and the president embraced it and said it's still on the table. host: one says i would like to hear the president being accountable and stop blaming bush for problems he himself has

made. do you think we will hear president bush's made? guest: we are beyond that. his first couple of speeches were about fixing things that he thought president bush did badly or changing things around the world. he talked a lot about president bush when it came to foreign issues and some of the economy, but i think four years down the road, you have earned a second term and probably won't hear anything about that. caller: good morning to c-span. thank you for taking my phone call. i would like to hear president obama really roll up his sleeves and get interactive and see more of him in the congress and the senate. we have had -- causing a huge ripple effect in all the states of this country, because if there is no federal funding, if there's no dollars, no more

money. there is no more money for education. because of no federal money coming to the states to -- business as usual in our states and in our counties and our villages and our cities across this country are also on a fiscal cliff and i would like to have president obama interact more and we aren't going to deal with the budget crisis right now, but wait until march to handle things. that's not the way that we can handle this country right now. we, all american taxpayers are having our own fiscal cliff problems. and that cannot be no more. our taxes are going up. our property taxes, school taxes, and any kind -- more

hype, hype of taxes or anything, it's really a challenge for the american workers. >> thanks for your call. go to jonathan strong to get a response. guest: that is one that mp members would agree with, including democrats. he has had a reputation of not reaching out and interacting with members of congress in a way that hurts his agenda on the hill. at the same time, i mean there is one chamber that hasn't done a budget for four years and decided it didn't make sense for them. now they have changed that and going to do it. host: what about the state level, might we see more of that? guest: obama has been reaching out to people like that, including c.e.o.'s, different types of groups of people and help him support what he

proposes. host: in the "washington times," senator borrow aso said the state of the union should focus on jobs. american people want to get back to work. independent line, brian? caller: i wanted to talk about why -- we have a lot of private companies making a lot of money off the war and a lot of people don't know it. and i would like to see obama just talk about what they are going to do to try to make our military not an economic thing for businesses like that. making money over our guys fighting for our country and put in harm's way. you have guys dying over there

that aren't in the military and i think it's sad. guest: that's the second call on that issue. i think you will hear again about cuts that need to be made under the defense department and domestic cuts but i'm not sure he will go into private companies and that sort of thing. people are talking about it but won't be a focus. host: do you think the state of the union address matters? a majority has said no. 63 say no. yes, 3. and over 250 comments on our facebook page. it will be active tonight as we bring you the state of the union here on c-span and have a share button where you can share where you will be watching the state of the union this evening. robert, independent caller. hi. caller: it doesn't matter which

president gets up and says tonight because congress and the senate, i don't know where they think they're at, they shoot him down any way. and maybe we might get something done here in the united states. host: how would you change things? caller: i don't know how to make it better, but the president, he tries and every time he tries to do something, they shoot him down. and nancy pelosi and that other guy that is head, they need to get rid of them because neither one of them is doing their job. host: how important is senator rubio's address and also senator rand paul in terms of getting the ratings of congress up a little bit? guest: it would have to be a pretty good speech to make a

dent. congress is very unpopular. one thing that is interesting, a lot of people like robert, but many, many people hole hold a very low opinion of congress and you asked them about their congress person, they say he is the greatest guy and always there for us and you see every two years, a lot of these members re-elected, most of them, even though the popularity is so low. host: one last question, we see snap shots of prior state of the unions and sitting behind the president is speaker of the house and the vice president, the head of the senate chamber. we see vice president joe biden. what's his role tonight and what will his role be this coming year? guest: pretty aggressive. the president has tasked him with all sorts of things.

point person on the gun control issues. the president has asked him to take up all sorts of other things regarding stimulus spending. he helped work out a deal with congress on fiscal issues. everybody says he is probably going to run for president and i don't know if he is not, but he definitely has a very high profile. host: our coverage starts at 8:00. the president will start speaking at 9:00 oak and we will bring you the responses afterwards and taking your calls before and after. thanks to our guests. both on twitter as well as writing on their company web sites and find them. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> president obama delivers his

fourth state of the union address before a joint session of congress at 9:00 p.m. we will bring you coverage of the republican response from florida senator marco rubio and reaction from journalists and several members of congress and we will get your thoughts by phone, facebook and twitter. state of the union tonight here on c-span and listen on c-span radio or watch online. and now a quick history of the state of the union. >> members of the congress, i have the great pleasure, the highest pleasure and great honor of presenting to you the president of the united states. [applause] >> i'm a senate historian. the state of the union message is mandated by the constitution in the words that from time to time, the president of the united states should give a

message to congress on the state of the union and recommendations of programs that he thinks should be followed. and george washington began that practice of giving a state of the union message to congress when first congress met. but washington went in person to the congress, went to the senate chamber and delivered a speech that had a series of recommendations. relatively short speech but in those days before there were standing committees, they used to cut the state of the union message up in paragraphs and create committees to address each one of the issues that the president suggested. but washington and john adams, vice president who became president followed that practice, so they created this idea that from time to time, an annual message. and for years, it was known as the annual message and didn't become known as the state of the union message until the 1940's.

in 1948, there was a hollywood movie called "state of the union" and that cemented the idea that the annual message was state of the union message. adams went in person to congress. jefferson didn't enjoy public speaking. he gave only two public speeches while he was president. his first nugral address and second inaugural address. he liked to be known as a writer and not a speaker and he thought the idea of the president going to congress personally to deliver a list of things that he wanted to see done was too much like the british king or the monarch going to parliament and he thought this wasn't appropriate for a republic. jefferson sent a message to congress and each year after that, presidents would send their messages that would be read by the clerk of the senate and the house rather by the president.

most members of congress could read it in the congressional record or in the newspapers. they didn't have to go and listen to a clerk reading the message. that became the tradition. and the constitution is not that specific about what it is, just time to time, this message needs to be given on the state of the union. in 1913, we had a new president who had been trained as a political scienceist. he had a ph.d. and that was woodrow wilson and he wrote about congress. and one of the things he felt was that the american president needed to be more like the british prime minister and couldn't be separate from the legislative branch but had to be the chief legislator as well as the chief executive. wilson decided he would go in person to deliver his messages. the first one he did was in april of 1913 and that was about the tariff. they didn't know what to do it.

the president was going to speak to them? they finally decided, they would do it in the house chamber and invite the senators over and there was a lot of grumbling and if congress had been less on its own, they probably didn't want the president to come up. and so woodrow wilson began the modern tradition of presidents each year going to give their state of the union message. gave his first state of the union message in december of 1913 and continued to do it in person until he was in paris negotiating the end of the first world war and he telegraphed his state of the union message back to congress in 1919. and since then presidents have followed both patterns. the only president in the united states who has not given a state of the union message in person since then was herbert hoover who also wasn't a great public speaker and didn't think much of

the message and sent it out. almost every president every year has felt this is too good an opportunity to miss to not to be able to go in person and the drama of the session to give a state of the union message. >> the president of the united states! [applause] >> this is the point when everybody in congress is sitting there and listening to you, the house and the senate. the cabinet is there, the supreme court is there. diplomats are there. the gallery is packed with people. instead of a major moment coming to go, the only other occasion is like that is the inauguration. >> this administration today here and now declares

unconditional war on poverty in america. >> i shall propose to this congress a $10 billion nationwide clean waters program to put modern mune wall waste treatment plants in every community to make our waters clean again and do it now. >> that influenced the legislative agenda for the year, whether or not congress chooses to follow the president's suggestions, ignores them or rewrites them, at least the president has given them an outline. sometimes the president never got a chance to give an address. harrison and garfield died before. they came into session in march. 19th century, state of the union messages were given in december.

when the constitution was changed, they moved it into january and february. there have been some miscues in some of the state of the union messages. grover cleveland sent a proposition dealing with the tariff. chief source of revenue in the country was the tariff and one of those things that divided parties and created great passions and unfortunately for cleveland whose party was not united on this issue and in fact lost the next election probably because of that division and a lot of people blamed his state of the union message. most cases

>> as long as there are galeries , the public can come in. but, of course, there aren't that many seats in the galeries and great demand. each member of congress gets a single ticket for a spouse or a member of their staff or favorite constituent or somebody to sit in the gallery. the press gallery. the diplomatic gallery is packed. the first lady, guests of the president. there is not a lot of space for the public on those occasions. over time, the public has seen this or read it through the media. newspapers covered it in general. and 19th century, you would have read the speech in the newspapers. in the 20th century, 1923, coolidge's state of the union

message was broadcast on the radio. in 1936, franklin roosevelt suggested moving it from moving it from the middle of the day to the evening so he would get a much larger audience on radio. in the 1940's, it was back during the day that television came along. 1947, truman's state of the union message was covered by television. 1965, johnson said let's move the tv show back into the evening so more people can get to see the state of the union message. now it's an evening performance and live tv and major networks are covering it and gets considerable audience that way and late 1990's, it has been streaming on the internet. in recent years, two parties have become cheerleading squads for their presidents presidents. but there are moments when

something that the president says inspires something more than than a partisan reaction. there is a bipartisan reaction. and you can tell what the mood of the congress is to some degree. >> and all the world knows that no successful system builds a wall to keep its people in and freedom out. [applause] >> and immediately after the speech, members of congress will rush out into the hall where there are dozens of cameras set up for television stations around the country that they will be getting personal reaction of the members. and in the house chamber, you can twitter and tweet and some of those people will be responding instantly. >> mr. speaker, mr. president, distinguished members of the house and senate, when we first

met here seven years ago, many of us for the first time, it was with the hope of beginning something new for america. we meet here tonight in this historic chamber to continue that work. if anyone expects us a proud resuscitation of the accomplishments of my administration, i say let's leave that to history. we aren't finished yet. [applause] >> one thing that you cannot do that is very different than say parliament where heckling is considered a fair sport and in the u.s. congress, you are to be rmentful of the president when he speaks. and few years ago, one member of the house did interrupt the president and shouted out and he was censured for doing that. that is considered to be unbecoming conduct. >> the reform -- the reforms i'm

proposing would not apply to those who are illegally. >> you lie. >> the office authors of the constitution believed in transparency and even though they wrote their constitution? secret, they required certain things to be open. not everything. they don't require congress to meet in open session. just from time to time to publish a journal of their proceedings and same thing is they don't ask the president to give an annual message but ask him from time to time to deliver a message on the state of the union. i think they would be pleased to see that the president comes pretty much every year to do this. they would be astonished that the congressional record is published every day after the proceedings and not only the state of the union message will be in there but every word that the members of the house and senate on the floor on that particular day. that is something they had

intended that this was a republic and democratic republic and represented of the people and the people had a right to know what was going on. in that sense, even though they were not all that specific, they set some goals that i think the government has met. >> i can report to you that the state of this old, but youthful union is good. [applause] [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> state of the union night here on c-span. next, a preview of the speech with guests and your phone calls. at 9:00 eastern, president obama delivers his fourth state of the union address and after that, at approximately 10:15 eastern, the republican response from florida senator marco rubio. >> having observed a steady improvement and the

opportunities and well-being of our citizens, i can report to you that the state of this old, but youthful union is good. >> once again in keeping with time-honored tradition, i have come to report to you on the state of the union. and i'm pleased to report that america is much improved. and there's good reason to believe that improvement will continue for the days ahead. >> my duty tonight is to report on the state of the union, not the state of our government, but of our american community. and to set forth our responsibilities in the words of our founders, to form a more perfect union. the state of the union is strong. >> as we gather tonight, our nation is at war, our economy is in recession and the civilized world faces unprecedented dangers, yet, the state of